In the lead up to a Federal Budget that’s tipped to leave the economy in deficit until at least 2030, directors from William Buck Accountants and Advisors weigh in on their 2020-21 budget expectations.
William Buck expects this budget to be focused more on shorter term economic stimulus rather than longer term improvements to the tax system to make it more effective and efficient, with substantive reforms unlikely to occur for another three to five years.
Greg Travers, Director of Tax Services said this is disappointing given the tax issues widely accepted over the last few years as requiring attention haven’t disappeared because of the pandemic.
Division 7A is an example and one that is highly relevant to SMEs, a group heavily impacted by the pandemic.
Mr Travers said Division 7A needs more attention now than it did prior to COVID-19.
“More businesses than ever will have borrowed money this year just to stay afloat. I expect there’s been loans going around everywhere and having such a complex system to deal with loans to and from companies makes it really difficult for business owners,” said Mr Travers.
Delays to the earmarked increase on Superannuation Guarantee contributions are also expected.
Tricia Kleinig, Principal of Superannuation said she expects the increase to 10% to be deferred due to the impact on businesses that are already struggling to stay afloat though the pandemic.
Meanwhile, Mrs Kleinig says she’d like to see an increase in the concessional contribution threshold, particularly for people aged 50 and over.
“A lot of people will have taken a fair hit to their super account values this year and some might be pulling back on salary sacrifice. I think there will be a lot of people in that older age bracket that might need the increase when they can afford to make contributions.”
“Removing some of the red tape around superannuation would also be welcomed. Let’s simplify things so people don’t make mistakes,” she said.
“Slashing the work test and other limits to ensure people keep their money in super would also be worthwhile.”
Adrian Frinsdorf, Director, Wealth Advisory agrees that people need to keep their money in super, as allowing access this year goes against funding for the future.
“It would be good to see some incentivisation in this Budget for people to contribute more and put money back in. There will be a whole group of workers, hospitality workers particularly, that will have lost out long-term by accessing and reducing their super this year,” said Mr Frinsdorf.
Property and Infrastructure
Fast tracking of infrastructure plans already in motion will likely be the key announcement here. These might include the $100 billion Infrastructure Investment Program and NBN upgrades. Speeding up these projects will create jobs and assist the country to emerge from the economic crisis, a key focus of this year’s budget.
Neil Brennan, Director, Business Advisory said we might also see an extension on the time limit for the application of the HomeBuilder package as it seems to be having a great effect in regional areas and will encourage construction.
Regarding commercial property he said “the pressure on landlords is becoming huge, so it’ll be interesting to see if there’s any support to relieve this as so far the support from the banks has been muddled.”
Manufacturing and Technology
We expect the Federal Budget to have a strong manufacturing focus, with the aim to kick start the economy through manufacturing and move towards a more nationalised manufacturing capability.
Prime Minister Scott Morrison has already announced that the Government will make $1.3 billion available in the budget to partner with private investors across three manufacturing streams.
In addition, Ian Cattanach, Director, Business Advisory said increasing spending on incentives like the Research and Development Tax Incentive will attract high levels of international investment into our manufacturing sector.
“Our industry contacts advise that they are already being sounded out to roll out training and development programs that will take manufacturing to the next level.”
“We would expect substantial spend in that space to ensure we have an appropriately skilled workforce for the desired sector,” said Mr Cattanach.
The introduction of an investment allowance which is highly expected, and we assume it will be similar to that introduced post-GFC, should give both local manufacturers and those international players the confidence to invest.
Any investment enticement brought about by the R&DTI will however be dependent upon whether the Government’s proposed changes to the tax incentive go ahead.
The reforms, if passed, will amount to a $1.8 billion cut to the scheme and any changes made will be done so retrospectively so some businesses that have claimed the incentive this year will be required to make repayments.
Jack Qi, Director, Business Advisory at William Buck said the government must support the local tech sector – one that is paramount to the nation’s economic recovery – by scrapping the proposed cuts.
“The proposed cuts are unpopular and ill-timed. Instead, let’s make employer share scheme tax concessions more accessible for all employees who cannot sell their shares/options in a liquid market,” suggested Mr Qi.
While an extension of telehealth and e-prescription services has already been announced, it will be interesting to see whether the Government increases funding to make these services longer term.
Belinda Hudson, Director, Business Advisory at William Buck said that while funding to aged care has been announced, she’d also like to see part of the budget go towards mental health.
“I’d expect to see an increased funding on mental health given the psychological impacts of isolation and living through a pandemic,” said Ms Hudson.
For more detail on any of the above sectors and how they might be impacted by the Budget, or commentary from one of our key spokespeople both pre or post hand-down, please contact Danielle Shaw, Group PR and Communications Advisor.